Advertiser Outcasts

Article |
Fri, 07/30/2010 - 23:10

Faster than Facebook's Mark Zuckerberg can downgrade a revenue forecast, marketers' hopes for social networks are slipping away. YouTube is a half-billion dollars underwater, says Credit Suisse. Revenues at once-hot MySpace will go south, says eMarketer. And Twitter still isn't accepting insertion orders. Marketing executives are left to wonder: Have we all been had?

Well, no. There's an important role for social media in marketing, but before we get there, let's admit these human networks stink as an ad vehicle. We're years into the fad and social media still isn't making money. Case in point: Facebook has 64.8 million users in the U.S. who each, on average, log in for two hours a day. Facebook is expected to make $230 million in U.S. advertising this year, according to eMarketer. That works out to $0.0049 per user, per hour. Facebook could double its revenue if it charged users a subscription fee of a penny per hour.

Dig into the new Razorfish Fluent report on social media marketing and you'll find evidence of consumers rebelling against ad intrusions. Its survey of 1,000 adults found 62 percent of consumers don't seek out opinions in social media, 90 percent are not very likely to interact with brands in five out of seven common industries, and 91 percent don't really trust their online friends. The study's authors shook off the negative findings with the conclusion, "Brands must engage with customers." Question is, do customers want to engage back?

We suggest advertisers wake up and face the reality that pushing marketing messages into social media will never work. Here are five simple reasons:

1. Egos don't listen. Look at your Twitter follower count and admit it: There's a culture of egotism in social media and that's part of the appeal. But as Tweets send links baiting followers to click through to blogs, users obsessed with building their own traffic ignore outside marketing messages.

2. Paid insertions don't scale. Sure, Izea claims its $500 Kmart gift-card promo to six bloggers touched 203,327 Twitter followers for 91.4 million impressions. But only a few paid inclusions in social media go viral and they're often random one-off hooks that can't be repeated.

3. Demos are growing more conservative. The hottest trend inside social media is its aging population. Older users are less prone to cool-hunting and relinking, and instead use social media as an e-mail substitute. The demos reduce the impact of influencers.

4. Robin Dunbar was right. The British anthropologist suggested humans can only manage about 150 relationships; social networks are recognizing users want limits. Facebook recently updated its privacy settings so you can choose which friends receive certain messages. As users learn to compartmentalize their social graphs, limits on propagation make it harder for marketing messages to go viral.

5. Traditional media still rules. U.S. consumers watch 5 hours and 9 minutes of live TV daily, according to Nielsen, versus 2.4 minutes of online video. For advertisers, this means 61 minutes per day of full-video promos are delivered via TV versus seconds online.

We've seen communication fads before. The telephone, fax machine and e-mail quickly drew marketing hyperbole and thought leaders giving speeches, and then marketers were just as quickly filtered out. Humans don't mind paid intrusions if there's a clear value exchange, but if it's a phone call during dinner, they erect Do Not Call lists. Social media doesn't have strong filters yet, but stay tuned.

So what's the good news for marketers? If you can't pitch in, you can pull out. Social networks allow you to hear for the first time vast conversations that do mention your brand. Services such as Radian6 and PeopleBrowsr help marketers dig deep into conversations and their pathways online. Studies have shown that homophily—the tendency of humans to group together—can be mined to predict future behavior, say, whether a friend of a customer will buy the same product.

The ultimate payday for Facebook and Twitter won't come from ad insertions, but instead by mining the relationships and conversations between people. Organizations can use the resulting analytical models to learn, to design products, to serve customers, to put out fires, perhaps even to predict the future.

It will be a wonderful thing to be able to hear that world. But advertisers, don't give up your TV, radio or print budgets yet. Because the world of social media isn't listening to you.